Billionaire puts wager on really local online news

Top Stories

“There's a premium in an engaged audience,” says Managing Editor Leela de Kretser.

Some people look at Manhattan and see the world's most crowded media market. Not J. Joseph Ricketts. The founder of online brokerage TD Ameritrade and new owner of the Chicago Cubs perceives an opportunity as wide as the Hudson River for his year-old local news operation, DNAinfo.com.

“Starting a media company today feels a little like running into a burning building,” the Wyoming-based billionaire says in an e-mail. He compares the digital revolution in media to changes he witnessed in financial services in the 1970s. “Opportunity exists in these moments of upheaval,” he declares.

DNAinfo, a website launched in November 2009 and now exiting the beta phase, represents Mr. Ricketts' ambitious gamble on the future of local news on the Web.

Operating out of 5,000 square feet on Seventh Avenue, the organization has a paid staff of 45—huge by startup standards—including 14 full-time reporters covering 10 Manhattan neighborhoods, from Inwood to the financial district. DNAinfo currently has three advertising sales staffers but plans to add five next year.

Mr. Ricketts, 69, doesn't expect to turn a profit anytime soon but insists that DNAinfo is not a vanity project. The entrepreneur argues that it's a first step toward a viable model for local news that he hopes to roll out eventually in other markets.

Micro-scoops

“The economics of content are out of whack, but they won't stay that way,” he says. “I'm betting that by providing news that people want quickly, over the Internet or on mobile devices, we can create a sustainable business.”

Mr. Ricketts won't disclose the amount he has invested in the company or how much he's willing to commit. One development in his favor is the rapid growth in local online ad spending. Nationwide, the market is projected to rise 18% next year from 2010, to $16 billion, according to Borrell Associates Inc.

Observers point out that customized content has long been available in such popular areas as sports, health, business and technology. Locally targeted news is the newest trend.

“There are going to be more sites like DNAinfo,” says Mark Josephson, chief executive of Outside.in, a hyperlocal content and advertising company. “Neighborhood focused news is the last frontier on the Web.”

DNAinfo's current focus is on building an audience, says Managing Editor Leela de Kretser, 32. She claims that the site is ahead of schedule.

A steady flow of micro-scoops, including chess players getting ticketed in Inwood Hill Park and a cable company painting over a popular mural on the Lower East Side, helped attract 920,000 unique visitors in November, according to internal figures. (A preliminary estimate from research firm Compete.com puts November traffic at 343,000.)

DNAinfo has already won some converts among local advertisers. Marc Glazer, owner of nightclub Columbus 72, has given up on The West Side Spirit weekly newspaper and now runs two ads on DNAinfo's Upper West Side and Upper East Side pages.

“The younger generation does not read the local papers very much,” Mr. Glazer says. And while the Spirit charged him $600 for a half-page in a single issue, the online ads are just $750 a month. It's an introductory rate, but the modest price indicates some of the challenges DNAinfo faces to reach profitability.

“You couldn't get enough ads on their website to cover their costs,” says John Sutter, publisher of Community Media, which produces five Manhattan papers, including The Villager and Downtown Express.

Plus, local merchants don't use ad agencies, which means DNAinfo must employ more salespeople.

“Local advertising requires feet on the street,” says Peter Krasilov-sky, an analyst at research firm BIA Kelsey. “And [Manhattan] has a lot of neighborhoods.”

Up against it

DNAinfo also faces plenty of competition, ranging from the websites of TV and radio stations to neighborhood blogs and The Local, a suite of blogs on NYTimes.com. AOL's Patch.com, which is on track to have more than 500 local sites by the end of the year, has established footholds in Brooklyn and Queens.

“DNAinfo is up against it from a competitive standpoint,” says Greg Sterling of consulting firm Sterling Market Intelligence.

Yet Mr. Ricketts and Ms. de Kretser are unfazed. They don't see anyone else doing as much neighborhood coverage.

“While it's true that there are many other media outlets in Manhattan, it's often hard to find news coverage of what's happening right on your block, like the fire down the street,” Mr. Ricketts says.

Thinking long-term

DNAINFO also has the luxury of being able to think long term.

“We're making a bet that there is a premium in a local, engaged audience,” Ms. de Kretser says. “What that premium is we don't know just yet.” n

Crain’s New York Business is the trusted voice of the New York business community—connecting businesses across the five boroughs by providing analysis and opinion on how to navigate New York’s complex business and political landscape.